Price Reductions

Under the GSA Schedules Program, GSA has determined that prices under GSA Schedule contracts are fair and reasonable. With regard to Schedule contracts for services, while GSA has determined that the labor hour (hourly rate) for a labor/skill category is fair and reasonable, GSA has not determined that the level of effort or mix of labor/skill categories proposed in response to a specific requirement represents the best value. Therefore, when buying services that require a statement of work, the ordering activity must consider the level of effort and mix of labor/skill categories proposed for a particular requirement, and make a determination that the total price is reasonable and represents the best value.

Reasons to seek price reductions include instances where the ordering activity has determined that a supply or service is available elsewhere at a lower price, or when establishing Blanket Purchase Agreements (BPAs) to fill recurring requirements. The potential volume of orders under BPAs offers the opportunity to secure price reductions/increased discounts, regardless of the size of individual orders. Ordering activities should also seek price reductions when the annual review of a BPA reveals that estimated quantities/amounts have been exceeded.

While ordering activities are encouraged to seek price reductions for any size Schedule contract order, they are required to seek price reductions if an order requirement or the estimated total value of orders expected under a BPA exceeds the simplified acquisition threshold. In response to the ordering activity's request for a price reduction, the contractor may or may not elect to offer a lower price than their Schedule contract price.

If further price reductions are not offered, the order may still be placed if the ordering activity determines that it is appropriate, since GSA has already determined the contract prices to be fair and reasonable.

It is a proven best practice that ordering activities should seek additional price reductions/increased discounts and/or concessions when placing an order under a GSA Schedule contract. Contractors will often "sharpen their pencils" to obtain a large Schedule contract order. GSA Schedule contractors are not required to pass on to all Schedule users a price reduction extended only to an individual customer for a specific order.

Ordering activities are advised to seek further price reductions when requirements warrant. Price reductions allow ordering activities to take advantage of the flexible and dynamic pricing in the commercial marketplace. By requesting a price reduction, the ordering activity can maximize its use of GSA Schedule contracts by taking advantage of such factors as:

Competitive forces;

Technological changes;

Labor conditions;

Supply and demand;

Industry sales goals; and

Inventory reductions.

The ability to seek additional price reductions and concessions allows the government not only to leverage its combined requirements to obtain favorable prices, terms, and conditions, but also to leverage agency requirements to take advantage of quantity or spot discounts available in a fluid, commercial pricing atmosphere.